What Policy Agenda Follows From "You Didn't Build That?"

(Note: There's a previous post on this subject of "you didn't build that," taking apart the conservative agenda around "job creators," which you can read here.)

The right is freaking out about President Obama's "you didn't build that" comment. Well, let's hope the conservatives in the audience have their fainting couches nearby and pearls sufficiently clutched, because I am going to start by kicking out two jams by my man, Franklin Delano Roosevelt, from back from when he was on the campaign trail:

"Our Republican leaders tell us economic laws--sacred, inviolable, unchangeable--cause panics which no one could prevent. But while they prate of economic laws, men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings." (Nomination Address, July 2nd, 1932, Chicago, IL)

"To insure the first set of rights, a Government must so order its functions as not to interfere with the individual. But even Jefferson realized that the exercise of the property rights might so interfere with the rights of the individual that the Government, without whose assistance the property rights could not exist, must intervene, not to destroy individualism, but to protect it." (Commonwealth Club Address, September 23, 1932, San Francisco, CA)

Now as long as people are guessing as to what the true, deeper, esoteric meaning is of President Obama saying, "Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that," let throw something out there. It may be less a legal argument for how all property is the creation of the state - or as Roosvelt said, "the Government, without whose assistance...property rights could not exist" - and more a genuine call for actually building roads and bridges, something Congress is no longer capable of doing in these times. The current House went to war over whether or not to fund transportation infrastructure. It barely passed in a last-minute bill that left many issues still on the table. Former Republican congressman and now Transportation Secretary Ray LaHood told Politico that the original proposal was “the worst transportation bill I’ve ever seen during 35 years of public service.” Given that capital markets are willing to lose money to loan to us for 20 years and there's lots of unemployed people around, this should be a no-brainer.

There's two responses I've seen on the right to this topic that I'd like to address on the "you didn't build that" point, and both come up in Julian Sanchez's post "What Follows from 'You Didn't Build That'?" One is that President Obama is addressing a strawman, and that unless you are speaking to an anarcho-capitalist nobody would disagree with this. "Even we minarchist libertarians are already on board with" basic public goods, he writes, and President Obama's vision of the role of the state is much more expansive than that. I disagree that there is no disagreement. I think that the current vision animating conservatism broadly and GOP policy narrowly is one of an economy in which value is created top-down by "job creators," which I outlined at length here. Rather than "Social Darwinist," as the president refers to it, I think it is clearer to say that the current GOP policy, centered around the Ryan Budget, is "Randian." Now, that doesn't mean the opposition believes every part of Ayn Rand's theories; it just means that their political compass is orientated towards her vision, and if you step in that direction you are getting closer to your goal.

The other response is that what Obama says is largely true, but there's no actual politics that falls out of it. Sanchez writes, "It’s not that the 'you didn’t build that' argument is wrong as a factual matter—it’s that it’s true about everything, and therefore doesn’t get you much of anything."

That's a good point. What does a "you didn't build that" agenda look like? Here's what I think it should include broadly, and what matters it should be concerned with, at least on all things related to economics. (Noting in advance that I'm pretty sure the mainstream Democratic Party and President Obama aren't going to sign up for most of this.)

The first step is what President Obama was calling for in the speech, which is progressive taxation. This doesn't require the state to do more than what it does now, or less than what it does now, but instead changes how we pay for those things. And here the idea would be that those who have benefitted the most have an obligation to contribute the most. This has historically been a controversial policy - when the French economist and statesman Turgot was presented with a project for progressive taxation he responded "we must execute the author, not the project" - and I think it is useful to consider the Ryan Plan as ending progressive taxation. There's a lot of ways to argue for progressive taxation, including shared sacrifice of marginal utility, and this is another.

Another would be emphasizing that public goods are actually that: publically provided and shared. There's been a move to both privatize large parts of the government and to emphasize putting costs for the use of publically provided infrastructure directly on end users instead of making them paid for broadly. Higher education, for instance, is now less a conscious set of planning the government does to make sure all who need education can receive it, which is paid for broadly through taxes, but instead of a series of coupons -- grants, loans, tax subsidies -- to subsidize individuals purchasing a self-investment by and for themselves, with the assumption that the "for-profit" sector and innovation broadly will expand in size and quality to pick up the slack of decreasing public provisioning. A broader question is what is treated as a commodity, and under what terms. Fighting back against both of these issues would be part of the agenda.

Continuing the inter-generational pact of the welfare state is another part. David Frum recently described the current GOP as "a going-out-of-business sale for the baby-boom generation." Not wrecking the entire social safety net and the mechanisms of the goverment on the way out the door, and instead thinking of the government as a pact through time, is another important point to emphasize.

Now for property. Conn Carroll at the Washington Examiner brings up Robert Hale and the progressive, legal realist attack on laissez faire, and Sanchez brings up the similar arguments of the Nagel/Murphy book “Myth of Ownership.” These arguments are partially inherited from people like Jeremy Bentham, who argued that “property is entirely the creature of the law.”

One of the critiques that comes out of these arguments is that the picture of property rights as a vertical relationship between a person and an object, one where the issue at play is whether the person's right over the object is “deserved all the way down,” is flawed, or at least insufficient. Property is really a horizontal set of relationships between people; it isn't just your control of an object but your control over others with respect to that object. The fundamental right of private property, of course, has always been the power to exclude others. But in the 1910s, a law professor named Wesley Hohfeld formalized property "rights" into a series of four capacities: "right," "privilege," "power," and "immunity." They contrast with four incapacities: "duty," "no-right," "liability," and "disability" (see here or here for more). Each type of property right is predicated on being able to force others to respond a certain way -- you have certain immunities while others have disabilities in response, certain powers while others have liabilities, and so on.

And so "liberty" for one comes at an expense of "liberty" for another. Since there's no neutral way for the government to set these rules, certainly no abstraction like "economic liberty" to guide the path, the question over social control of property, as Leonard Trelawny Hobhouse put it, is "not of increasing or diminishing, but of reorganizing, restraints." The issue here isn't that everything is up for grabs - it's that there is no "neutral," and appealing to higher abstractions as "rights" or "ownership" don't get you anywhere.

Perhaps you find that objectionable or maybe you don't, so let's build out the You Didn't Build That Agenda in regards to property. The first stop is that there needs to be a democratic element and accountability in setting up these rules. If only because trying to back out a system of rules from vague appeals to "liberty" (especially as interpreted by courts) don't actually get us anywhere. The second issue would be acknowledging and confronting the issue that the current set up of the rules of property and economic exchange are important in creating our current economic inequality, from the runaway wealth of the top 1% to the stagnating wages of everyone else.

The way we set up the rules creates a lot of winners. The top 1% consists mostly of corporate CEOs and financial wealth. The former are influenced by the way we structure corporations through law -- read Demos' Anthony Kammer on "Reimagining the Corporate Form: Toward a More Democratic System of Corporate Governance" -- and compensation packages through tax law. The latter has a clear link with financial deregulation and much of the system exists in a way where finance's failure can pose huge externalities on other market actors and the macroeconomy as a whole. Another example is patent law which, as many note, provides large windfalls for owners. Over half of the windfall that comes from the fact that we privledge income from capital over income from labor in taxation goes to the top 0.1%. Dean Baker’s e-book, "The End of Loser Liberalism: Making Markets Progressive," is great on these points.

The way we set up the rules also creates a lot of losers. Bankruptcy law has become tougher on regular people while corporations do fine under it, something Robert Kuttner writes about as an important double standard. It is harder to unionize, and simple measures to allow for card check have failed in Congress. Inequality at the low end can be largely attributed to decreased unionization (for men) and a stagnant minimum wage (for women), both of which reduce bargaining power for their respective parties.

There's also macroeconomic policy, something the government does (or doesn't do) that has significant impact on economic outcomes but that impacts all kinds of claims to property. As Ryan Avent notes, commenting on the You Didn't Build That issue, the "operating monetary principle over the past generation—price and financial stability at all costs, help for the unemployed if we get around to it and only to the extent that the first priorities aren't endangered—has facilitated the creation of an enormous amount of financial wealth," as well as stagnating wages for everyone else. Full employment for all is a great start, though there's no way to appeal to it by referencing abstractions of economic liberty.